Patent Laws Squeezing Small Companies

Next month marks the one-year anniversary of the shift in the U.S. intellectual property landscape, and business owners and the organizations they work with said the changes are squeezing new and small enterprises.

On March 16, the first inventor-to-file provision of the Leahy-Smith America Invents Act went into effect. The changes are the most significant to the system since 1952, as they harmonized the U.S. patent system with the rest of the world. The most significant change centered on awarding patents to the first person to file an application. The previous system, meanwhile, put priority on the person who could show he or she invented a concept first.

“Small-business owners and inventors are really feeling the need to file earlier in the process,” said Kimberly Mayer, statewide director of technology development and commercialization for the N.C. Small Business & Technology Development Center in Raleigh. “They really want to make sure that they are protecting their rights.”

But small companies often need capital or an investment to fund what can turn into a very expensive application process.

The changes have turned getting a patent “into a money game instead of an invention game,” said Robbie Troxler, director of advanced technologies for Troxler Electronic Laboratories, a company in Research Triangle Park, N.C., with about 100 employees that develops and manufactures quality control and measurement equipment for the highway and construction industry.

Under the old system, Troxler had a 12-month grace period that followed a public disclosure of an invention before he needed to file an application for protection. Troxler used that time to test and refine his invention, he said.

“I do feasibility and lab work, and get things out in the field a little bit and see how it performs before I file,” he said.

Additionally, companies could use that period to raise capital from investors or customers who have tried the product. The process, Troxler said, would also help him identify duds before he sunk thousands of dollars into an invention.

“I am a little guy that can’t just throw money at something,” he said.

Troxler said the patent application process ranges from $6,000 to $10,000, including attorney and other fees.

Mayer’s group, which doesn’t offer legal advice, works with clients to help them identify resources to start building a solid, defendable patent claim, Mayer said.

Mayer recommends that inventors on a tight budget familiarize themselves with patent terms and the process as much as possible before hiring an attorney. She also advised inventors to do a preliminary patent search on the U.S. Patent and Trademark Office’s website or on Google Patent, which searches more than 7 million U.S. patents.

“They can at least get an idea of what the landscape looks like, and whether there is a product that sounds similar that they can call it to the attention of the patent attorney,” Mayer said.

Inventors should also understand the importance of intellectual property in their given industry, Mayer said. In industries such as software, a patent may not be as significant compared to situations in which investors are needed to move the process forward.

The America Invents Act requires the U.S. Patent and Trademark Office to work with law associations to establish pro bono programs that assist small businesses and complete studies to evaluate how the changes affected small businesses.

“The people that are most hurt are the ones that are really (barely) able to afford any sort of patent,” said Chapel Hill, N.C., patent attorney Kevin Flynn.

Their only choice may be to put together a provisional application without the assistance of an attorney, he said. They might think they have protection but learn months down the road that their submitted information didn’t have enough substance to merit a defendable claim, Flynn and others said.

“A provisional doesn’t have to be polished, but it needs to have substance,” Flynn said.

Flynn likens compiling a provisional application to packing up a station wagon before a camping trip. The equipment may be packed any which way, but it has to all be there.

“Otherwise when you get to the campsite, you don’t have fuel for the camp stove or stakes for the tent,” he said.

Inventors also need to include the best mode to make and use the invention, plus suboptimal and other modes to preclude others from having a nearly identical product.

“You really need to try to make it as broad as possible” when putting together a patent application, he said. But don’t go too far and suggest you know how to do things that you don’t, as the application could be used against you in the future.

“It’s a difficult game,” Flynn said.

Inventors should be careful about sharing their product before they file an application, and they should file an expanded application after improvements are made.

Meanwhile, inventors who filed provisional patent applications just before March 16, 2013, need to get ready to move forward, said Justin Nifong, a Raleigh patent attorney at NK Patent Law.

Nifong’s firm is working to put together 22 patent applications, which take between 20 to 30 hours each, before March 15.

About 24,300 provisional applications were filed the week ending March 15, compared to 4,099 the week before, according to the U.S. patent office.

Those applications are all due to be converted into the more formal utility patent or inventors risk having to refile under the new system, Nifong said.

“And it’s possible that if they refile, they will not be the first to file,” Nifong said.